A recent House bill, titled the "Closing Loopholes for Orphan Drugs Act," would narrow the exception for orphan drugs in the federal 340B Drug Pricing program. Representative Peter Welch (D-VT) introduced the bill on June 13, 2017. According to Representative Welch, the "legislation would close a loophole that allows drug companies to deny discounts for certain drugs," thereby assisting certain providers that rely on "savings from federally mandated discounted prescription drugs."
The bill is the most recent in a string of events related to the exception for orphan drugs in the Drug Pricing program. As background, the Patient Protection and Affordable Care Act of 2010 (PPACA), as amended by the Health Care and Education Reconciliation Act of 2010 (HCERA), revised the 340B statute to add the following provider types as 340B covered entities: children’s hospitals, free-standing cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals. However, with the exception of children’s hospitals, all of these newly eligible covered entities were excluded from access to discount pricing under the 340B program for orphan drugs used to treat rare diseases or conditions. As amended by HCERA and Section 204 of the Medicare and Medicaid Extenders Act of 2010, section 340B(e) of the PHSA sets forth this orphan drug exclusion as follows:
EXCLUSION OF ORPHAN DRUGS FOR CERTAIN COVERED ENTITIES—For covered entities described in subparagraph (M) (other than a children’s hospital described in subparagraph (M)), (N), or (O) of subsection (a)(4), the term “covered outpatient drug” shall not include a drug designated by the Secretary under section 526 of the Federal Food, Drug, and Cosmetic Act for a rare disease or condition.
In May 2011, the Health Resources and Services Administration (HRSA) issued a proposed rule to implement the Orphan Drug Rule, such that the orphan drug exception would apply only when the orphan drug is used for the orphan indication. Since that time, HRSA, the U.S. Department of Health and Human Services, pharmaceutical manufacturers, and covered entities have been in constant debate (and in some cases, litigation) regarding the orphan drug exclusion from 340B pricing.
The bill introduced by Representative Welch would implement a more limited orphan drug exclusion to 340B pricing by modifying Section 340B(e) of the PHSA (42 U.S.C. § 256b(e)) to now read:
EXCLUSION OF ORPHAN DRUGS FOR CERTAIN COVERED ENTITIES—For covered entities described in subparagraph (M) (other than a children’s hospital described in subparagraph (M)), (N), or (O) of subsection (a)(4), the term “covered outpatient drug” shall not include a drug designated by the Secretary under section 526 of the Federal Food, Drug, and Cosmetic Act for a rare disease or condition when transferred, prescribed, sold, or otherwise used for the rare condition or disease for which such drug is so designated.
Notably, the proposed change appears to require particular covered entities to actually track and trace the indication for which a particular unit of drug is used, so that the 340B pricing exclusion would only apply when the drug is being used in accordance with its orphan drug designation. This requirement was included despite concerns from Manufacturers that many of these covered entities would be unable to track and trace these drug indications accurately.
The bill, cosponsored by Representative Gregg Harper (R-MS), was referred to the House Energy and Commerce Committee. If the bill moves forward, expect this already hotly debated topic to again capture the attention of interested parties, as it could have a substantial impact on pharmaceutical manufacturers and covered entities under the 340B program.
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